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Can you reckon our political system functions? Perhaps along the lines of this. We elect MPs. They vote on bills. If a majority is obtained, the bills are enacted as law. Legislation are enforced by the courts. Simple as that. Well, that used to be how it operated in the past. Those days are over.

The Emergence of Offshore Courts

Today, international firms, or the billionaires who own them, are able to litigate against elected administrations for the policies they pass, at offshore tribunals staffed by business advocates. Such disputes take place in secret. Differing from national judiciaries, these panels provide no avenue for appeal or oversight by judges. The general public cannot take a case to them, nor can our government, or even businesses operating from this country. Access is granted exclusively to entities operating from foreign soil.

If a tribunal determines that a law or policy might diminish the corporation’s anticipated profits, it may order compensation of vast sums, potentially billions.

These sums are based not on actual losses but funds the panel members conclude the company could potentially have made. The administration may have to rescind the measure. It is deterred from enacting future policies of a similar nature, for fear of being sued.

A Mechanism Running Rampant

Unprecedented levels of cases are being initiated, as firms observe each other, and hedge funds finance suits for a share of a portion of the settlements. The result? National sovereignty and democratic governance are turning into prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede domestic law and the rulings enacted by parliaments is that this stipulation has been incorporated – without public consent, and frequently under a climate of total confidentiality – inside international trade agreements.

A Concrete Example: The Cumbrian Coalmine

Last year, activists secured a significant win at the senior court. The presiding officer determined that plans to excavate the first major coal mine in the UK for a generation, in northwest England, were wrongly permitted by the outgoing administration, which had endorsed the bizarre claim that the mine could have no consequence on national carbon targets. The Labour government later cancelled the permission the Tories had approved. Today, this success faces being overturned by an offshore tribunal accountable to exclusively the corporations petitioning it.

During August, a firm whose ultimate owners reside in the tax haven filed a lawsuit against the UK government. Recently a arbitration panel in the US capital was established to adjudicate on it.

The company is suing the UK for the money it could have earned if the mine had received permission to commence operations. We have no clear indication how much this sum represents. Who is representing it in opposition to the state? A member of parliament, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot the MP. The government enacts a policy, the domestic court upholds it, then a foreign company contests it through an unaccountable private court, and a sitting MP acts on its behalf.

An Oligarch's Lawsuit

Simultaneously that the panel on the mining lawsuit was appointed, information emerged from a government response that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. Details are nothing of the case so far, but it seems likely that he may employ the tribunal to challenge the sanctions the UK enacted against him after the invasion of Ukraine. He has previously initiated proceedings against a small nation on these grounds, demanding $16bn: equivalent to half of government’s yearly income. Part of the lawyers representing him there? Cherie Blair, spouse of the former British prime minister.

Legal experts argue that the EU’s delay in leveraging immobilised Russian assets as collateral for its aid for Ukraine arises from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, undemocratic power over elected governments could be blocking the finance Ukraine critically depends on.

False Assurances and Escalating Threats

Politicians promised that such things could not occur. Previously, a former prime minister, championing the biggest and most dangerous of all investment pacts, stated: “Britain has agreed to trade deal after trade deal and we have never seen a problem in the past.” An adviser on this topic accused activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that exclusively weaker states needed to fear ISDS claims. Cautionary notes that “as corporations begin to understand the power bestowed upon them, they will redirect their efforts from the poorer states to the developed economies” were greeted by general mockery.

That warning has now materialised. This year, oil and gas and extraction companies have filed a record number of claims against nations rich and poor, contesting – as in the case of the Whitehaven project – official measures to stop environmental catastrophe. Companies have so far won vast sums via ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP